• What is trickle-down economics and what is Biden’s “bottom-up and middle-out” plan to counteract it?
  • What is the history of trickle-down economics in the US?

Last week, President Biden presented his ambitious new budget, the American Families Plan (AFP), to invest in the future of America’s economy. He spoke to Congress, saying: “My fellow Americans, trickle-down economics has never worked. It’s time to grow the economy from the bottom up and middle-out.”

Biden’s plan will counteract Trump’s TCJA and its emphasis on trickle-down economics, which has been both a driving and crashing factor in America’s economic growth.

Trickle-Down Economics, Simplified

The main argument supporting trickle-down economics is based on two expectations: (1) that all members of society benefit from growth, and (2) that growth has a higher chance of coming from those who have the skills and resources available to create productive output.

Has It Worked In The Past?

In the post-9/11 2001 recession, President Bush implemented the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the “Act”). The Act reduced tax rates on capital gains and dividends, encouraging investments in stocks, and ultimately aiding the country’s economic recovery.

Of course, this also led to overheating of the market, which resulted in the 2008 recession. Thus, the debate on trickle-down economics goes both ways.

AFP And Biden’s Vision For American Economics

Biden’s fear is that tax cuts like we saw with Bush’s Act and Trump’s TCJA won’t actually pump money back into the U.S. economy, but bury it deeper in the pockets of America’s top 1%, CEOs, and major corporations.

The AFP sets high tax rates on such entities, which effectively takes money out of the investment pool. However, with the goal of growing the economy from the “bottom-up and middle-out,” the AFP looks to place that tax money directly in the hands of those who need it most.

Trickle-down economics is a tricky debate and one with no concrete answer. The U.S. economy has always been about risk-taking; hopefully, the AFP takes risks that will best benefit the American people.

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Devin McQuillan
Associate, Creative Solutions

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